The ubiquitin-proteasome system has come to be known as a vital constituent of mammalian cells. The proteasome is a large nonlysosomal enzyme that acts in concert with an 8.5 kDa polypeptide called ubiquitin and a series of conjugating enzymes, known as E1, E2 and E3, that covalently bind multiple ubiquitin moieties in a polyubiquitin chain to protein substrates in a process called ubiquitylation. The latter process targets protein substrates for unfolding and degradation by the 26S proteasome. This enzyme system specifically recognizes and degrades polyubiquitylated proteins, many of which are key proteins involved in cell cycle regulation, apoptosis, signal transduction, and antigen presentation. The 26S proteasome contains a cylinder-shaped 20S catalytic core that, itself, degrades proteins in an ATP- and ubiquitin-independent manner. The 20S form is actually the predominant enzyme form in mammalian cells. Proteolysis by the constitutive 20S proteasome is vital in removing oxidized, misfolded and otherwise modified proteins. Such degradation is critical as a means of cellular detoxification, as intracellular accumulation of damaged and misfolded proteins is potentially lethal. Studies have shown that inhibition of proteasome activity can lead to cell death. Ethanol and its metabolism cause partial inhibition of the proteasome. This leads to a number of pleiotropic effects that can affect a variety of cellular processes. This critical review describes important aspects of ethanol metabolism and its influence on the proteasome. The review will summarize recent findings on: (1) the interactions between the proteasome and the ethanol metabolizing enzyme, CYP2E1; (2) the dynamics of proteasome inhibition by ethanol in animal models and cultured cells; (3) ethanol-elicited suppression of proteasome activity and its effect on signal transduction; (4) The role of proteasome inhibition in cytokine production by liver cells; and (5) ethanol elicited suppression of peptide hydrolysis and the potential effects on antigen presentation. While the principal focus is on alcohol-induced liver injury, the authors foresee that the findings presented in this review will prompt further research on the role of this proteolytic system in other tissues injured by excessive alcohol consumption.